Reduction of prices the way to go

Victoria Ruzvidzo Business Focus Zimbabwe is for Zimbabweans and the challenges it is facing will only be resolved by Zimbabweans. This is not a new assertion but one that we have heard and written about countless times. We may have partners in development but ultimately the pace at which this economy will recover will be determined by ourselves as Zimbabweans.

It is with this understanding that I would like to applaud Reserve Bank of Zimbabwe Governor Dr John Mangudya for calling on a further reduction of prices for goods and services.

Indeed, the US dollar is grossly undervalued in this country and it is about time that we give it its true value by pricing goods at proper levels, even after considering the economic variables at play.

It is unfortunate that when the multi-currency trading system was introduced in 2009, producers and individuals alike still had the Zimbabwe dollar mentality and the hyperinflationary environment that saw all of us becoming trillionaires overnight.

Then, there was pricing madness which, however, did not disappear when we adopted stronger and more stable currencies.

For a while, we could purchase quite a bit on $100 but now we need much more for the same basket of groceries. There were shops where you could emerge with a bit of kitchenware and kids stuff from $20 but now it is no longer the case.

The profiteering mentality still lingers on in the economy while in some cases production costs have become unreasonably high, leaving retailers with no choice but to charge high prices.

Comparatively, the same $100, which does not buy much in this country, can buy me 10 times more stuff in any country in the region. Why is that so?

Are our production costs so skewed compared to our neighbours? Or have we become greedier.

A few years ago a friend of my mine who relocated to the United States, filled a whole trolley with groceries and she paid $50. She could not believe her eyes as she had already taken out two $100 bills to pay for the goods.

She phoned me with so much excitement at that point I wished I could be in her shoes.

Indeed, there could be arguments for or against the current pricing system or formulae but we need to assign proper value to the United States dollar and other currencies which we are using.

Unrealistic prices continue to impede on overall growth. They result in more demands for salary increases and they reduce productivity as frustrated workers will not give of their best when they are faced with what they term “low” salaries in relation to the going prices for goods and services, rentals, etcetera.

The situation is so bad that you find a plumber charging $80 labour for fixing three taps or an electrician charging $30 labour for fixing a switch and two lamps.

But the earlier we realise that this trend will always come back to haunt us the better so that we price goods and services correctly. The ripple effect will see the general standard of living improving.

As correctly stated by Dr Mangudya, Zimbabwe is in an unfortunate position in that we cannot depreciate the currency to maintain competitiveness because it is a borrowed one, something that other countries in the region can do to their advantage. This means we need to maximise on the factors that we can control, to ensure we remain competitive on the global stage and even locally as we compete with the huge influx of imports.

“The US dollar has been appreciating against all major currencies and because of that, products of our neighbours are cheaper. In other countries they can depreciate their currencies to maintain their competitiveness, but in Zimbabwe we cannot because we have a fixed exchange rate because we are using the US dollar.

“What we need to do, therefore, is to depreciate the currency internally through price reductions because our prices are very high,” said Dr Mangudya.

Indeed, the good governor is spot on.

In the last few weeks we have witnessed the prices of bread, cooking oil, toothpaste and mobile phone tariffs, among others, going down but we implore further reductions.

Those that have not eased their prices need to do so to help stabilise the economy.

The onus is on us to individually and collectively seek to revive and grow the economy.

It should be every Zimbabwean’s responsibility to contribute towards stabilisation of prices, hence the economy.

As stated earlier, retailers and producers continue to face stiff competition from an influx of imports but the idea is to beat these at their game. Correct pricing will see people switch to local products, which are usually of a better quality than the cheap imports which are not just cheap in terms of price but quality too. Containers upon container are being smuggled into the country on a daily basis, the damage to industry is there for all to see.

But efforts should be made to ensure local products do not continue to be priced out of the market. Depending on the overheads, a profit of 30 percent or 40 percent is quite decent, as opposed to an obscene 200 percent or 300 percent that some businesses and individuals continue to insist on.

We also salute the central bank for the introduction of the bond coins which have since earned the confidence of consumers and suppliers alike despite the initial resistance. The 20 cents or 10 cents savings now being enjoyed on some products and the availability of real cash as change has had a positive effect in the economy.

Such efforts, no matter how small in comparison to the myriad of challenges afflicting the economy, will bring sustainable change in this economy.

These home-grown efforts need to be supported as we all yearn for a better economy.

Furthermore, banks will also need to heed Dr Mangudya’s call and charge realistic rates on borrowing. Figures of up to 30 percent per annum are choking the very businesses and individuals that the same banks count on as their customers.

Funds need to be available on the market at affordable rates so that the banks do not end up with a colossal list of bad loans which they will have to provide for in their books.

Life is about give and take and the minute we all appreciate this concept the easier it will be appreciate the prosper-thy-neighbour concepts.

Banks are penalising borrowers and yet the financial sector is the economic engine that should move the economy to the next level.

We also commend Government’s effort to improve business conditions through the setting up of an ad hoc committee to assess the environment and make recommendations.

This committee should get on with business and expeditiosly diagnose the challenges and proffer solutions which will transform the business environment.

Furthermore, the impending launch of the Client Service Charter Compendium by the Office of the President is a welcome move that will obviously improve service delivery in public departments.

The compendium, we are made to understand, will empower Zimbabweans to report service shortfalls while providing an avenue through which suggestions can be harnessed.

“We have listened to people’s needs and we are answering the call. As servants of the public and taxpayers, it is the duty of each and everyone of us to deliver the services our citizens and businesses need to thrive.

“Putting in place client service charter for each ministry, department and public enterprise is the first step in better meeting their needs and expectation,” said the Chief Secretary to the President and Cabinet, Dr Misheck Sibanda.

This is a highly progressive initiative that will take care of a number of bottlenecks that have constrained business activities.

Poor service delivery has always been an issue when doing business in this country and once the service charters are in place and their dictates adhered to, Zimbabwe will be home and dry in terms of creating a conducive environment in which Government effectively plays the facilitative role that it must to build this economy.

Indeed, such efforts will go a long way in ridding the economy of some of its challenges. More of such proactive efforts will yield much for this economy. The year may well turn out to be a good one for all of us.